A fifth of British households’ cash savings are being eroded by inflation on zero-interest accounts, new figures show.
According to analysis of data from the Bank of England by Coventry Building Society, around £268bn is currently deposited in flexible and easily accessible accounts that do not pay interest.
This means that the real value of the money in these 0% accounts is greatly eroded by inflation, which stands at 10.7%.
There are currently no interest-paying accounts that match the general rate of inflation – the highest easily accessible savings rate on the market is 5.12% on Barclays’ Rainy Day Saver, although it only applies to balances up to £5,000.
Jeremy Cox, of Coventry Building Society, said rates of around 3% were readily available on the savings market. He added: “We expect money going into zero-paying, easy-to-access accounts to be lower as savers move money into higher-interest accounts to maximize their savings.”
The Society said the latest statistics showed growth in the total amount of household savings in current accounts, easy access, fixed rate bonds and cash Isas in November compared to the previous month, despite the cost of living crisis.
According to data from the Bank of England, the total amount of cash in savings accounts now exceeds £1.73 trillion.
But Anna Bowes, of analyst Savings Champion, said it was “worrying that so much is languishing on accounts that pay no interest at all”.
She added: “The savings rate is at its highest in a decade, and with inflation last seen in the 1980s, making the most of your savings is more important than ever.
“Even if you need access to your money, you can earn as much as 2.86 pc a year and still get your hands on your money whenever you want, without penalty.”
Ms Bowes said households with no savings were “effectively” turning down savings of up to £1,400, based on a £50,000 down payment.
However, Mr Cox said higher rates meant depositors should be wary of going over personal savings. He said: “The current allowance gives basic and higher rate taxpayers a tax-free allowance on their savings income of £1,000 and £500 respectively, unless their savings are protected by an ISA.
“ISAs offer a tax-friendly way to save £20,000 a year and we believe the popularity of these accounts will increase as many savers use their annual Isa credits this year.”